Genesis has filed for Chapter 11 Bankruptcy
Another one Bites The Dust
Digital currency brokerage Genesis, a subsidiary of Digital Currency Group (DCG), announced that it has filed for Chapter 11 bankruptcy on Thursday. The filing comes as the company faces legal troubles from the Securities and Exchange Commission (SEC) and has been negatively impacted by the collapses of crypto firms Three Arrows Capital and FTX.
According to Genesis’ interim CEO Derar Islim, the in-court restructuring process presents the best option to preserve assets and create the best possible outcome for all stakeholders. The company claims to have more than $150 million in cash on hand, which it believes will be sufficient to fund operations during the restructuring process.
Chapter 11
Genesis Global and its lending-focused subsidiaries Genesis Global Capital and Genesis Asia Pacific are the entities that filed for Chapter 11 in the Southern District of New York. However, a spokesperson for Genesis clarified that Genesis Global Trading and other subsidiaries involved in derivatives, spot trading, and custody businesses are not included in the filing and will continue to operate as usual.
The news of Genesis’ bankruptcy filing follows widespread rumors and reports of the company’s impending financial troubles, as well as a recent SEC charge against the firm and crypto exchange Gemini for violating securities law. Genesis also laid off 30% of its employees at the beginning of the year.
The company was once one of the industry’s leading players, having launched the first over-the-counter Bitcoin trading desk in 2013. However, in recent times, Genesis has been involved in a public battle with crypto exchange Gemini. The two firms had partnered on the Gemini Earn program, but Gemini claims that Genesis is withholding more than $900 million in customer funds. The Gemini Earn program was finally terminated on January 11.
Winklevoss responds with strong words
In response to the announcement, Gemini co-founder and president Cameron Winklevoss stated that the company will use every tool available in the bankruptcy court to maximize recovery for Earn users and any other parties within the court’s jurisdiction. He also warned that unless Genesis and DCG come to a fair agreement with creditors, a lawsuit will be filed against them.
Cameron Winklevoss wrote on Twitter that “we will use every tool available to us in the bankruptcy court to maximize recovery for Earn users and any other parties within the bankruptcy court’s jurisdiction.” “Unless Barry and DCG come to their senses and make a fair offer to creditors, we will be filing a lawsuit against Barry and DCG imminently,” Winklevoss posted. “Crucially, the decision to put Genesis into bankruptcy does not insulate [DCG CEO] Barry [Silbert], DCG, and any other wrongdoers from accountability.”
The official announcement confirms that Genesis was adversely impacted by two of the largest collapses in the crypto industry last year. “We have made significant progress refining our business plans to remedy liquidity issues caused by the recent extraordinary challenges in our industry—including the default of Three Arrows Capital and the bankruptcy of FTX,” Islim said. “We seek to implement a path to maximize value and provide the best opportunity for our business to emerge well-positioned for the future.”
5/ We have been preparing to take direct legal action against Barry, DCG, and others who share responsibility for the fraud that has caused harm to the 340,000+ Earn users and others duped by Genesis and its accomplices.
— Cameron Winklevoss (@cameron) January 20, 2023
The filings also included a list of the company’s top creditors, many of whom are unnamed, but include Mirana Corp. of Singapore, Moonalpha Financial Services in Hong Kong, Coincident Capital in the Cayman Islands, Donut, Inc., Switzerland-based Altcoinomy, Streami Inc. of Korea, and Heliva International in Panama – each of whom has an unsecured claim of $50 million to $150 million.
To navigate the restructuring process, Genesis has retained four New York law firms: Cleary Gottlieb Steen & Hamilton, Alvarez & Marsal Holdings, Moelis & Company, and Kroll R…
The news of Genesis’ bankruptcy filing serves as a reminder of the volatility and risks present in the crypto industry. It also highlights the need for regulatory oversight and protection for consumers and investors in the space. As the industry continues to evolve and mature, it’s crucial that firms and exchanges implement strong risk management and compliance practices to ensure their long-term viability and stability.
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